Kidd v Van Heeren
[2016] NZHC 568
•5 April 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-725 [2016] NZHC 568
BETWEEN MICHAEL DAVID KIDD
Plaintiff
AND
ALEXANDER PIETER VAN HEEREN Defendant
Hearing: 11 March 2016 Counsel:
BR Latimour, SD Williams and A Wakeman for Defendant
(Applicant)
S Mills QC and B O'Callahan for Plaintiff (Respondent)Judgment:
5 April 2016
JUDGMENT (No 10) OF FOGARTY J
This judgment was delivered by Justice Fogarty on
5 April 2016 at 4.00 p.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors: Kirkland Morrison O’Callahan Limited, Auckland
Fee Langstone, Auckland
KIDD v VAN HEEREN [2016] NZHC 568 [5 April 2016]
Introduction
[1] On 7 July 2015, in Judgment (No 3), I refused indemnity costs against the plaintiff, Mr Kidd.
[2] In Judgment (No 5), delivered on 14 December 2015, I allowed the plaintiff’s claim for increased costs, determining various consequential matters, largely in the plaintiff’s favour, finding that it is appropriate to consider the complexity and significance of the proceedings and that there is no anchor in terms of scale when increasing costs under r 14.6(3)(b) and that it is appropriate to have regard to the
actual time spent.1
[3] Since then the parties have agreed to a revised schedule of costs in accordance with Judgment (No 5), which resulted in the plaintiff was awarded the sum of $552,122.00. The judgment has been appealed to the Court of Appeal. It is currently set down to be heard in the same fixture allocated for the substantive appeal. But senior counsel for both parties have requested for the Court to allocate a later date of hearing on the cost issues.
[4] It is in this context that the defendant, Mr van Heeren, applies for an interim stay of execution of the costs order.
The application and the notice of opposition
[5] The defendant’s application is for orders that the execution of the costs orders made pursuant to Judgment (No 5) be stayed on conditions pending the determination of the defendant’s appeals against the substantive judgment or the determination of the appeal of the costs judgment, whichever is the latter.
[6] The application offers three alternative conditions:
(a) That the full amount of the costs judgment be retained by the
defendant’s solicitors in an interest-bearing deposit (the status quo);
1 Kidd v van Heeren (No 5) [2015] NZHC 3191 at [113].
(b)That the sum be paid to the Court pending the determination of the appeal; or
(c) That the plaintiff provides the defendant with some form of security for repayment of the full amount of the costs in a form satisfactory to the Court and the defendant.
[7] In support of the application, the argument is that the substantive appeal is bonafide and raises legitimate questions to be tried, as does the costs appeal.
[8] In respect of the costs appeal, it is contended that the judgment is novel, and the quantum is extremely high, in the context of a five-day interlocutory hearing so that the appeal on costs involves important issues of law regarding the application of the principles of the High Court’s costs regime. It is also contended that the costs appeal will be rendered nugatory if the plaintiff is unable to repay the costs and that there is a real risk of this occurring, as it is likely that any sum paid over now will be used to pay third parties in order to meet the plaintiff’s legal and other professional costs associated with this and possibly other proceedings. In particular, it is said that there is good reason that a substantial amount of the money will be paid to a Mr Brian Cooper, who has a financial interest in the outcome of the proceedings.
[9] The defendant also submitted that in response what he alleges to have been a reasonable request for security in the event of repayment, the plaintiff obtained and unsuccessfully attempted to enforce a sales order at the offices of the defendant’s solicitors in order to seize the amount of costs held in the trust account.
[10] The notice of opposition contends that the plaintiff is entitled to the fruits of his judgment and that the defendant has failed to comply with an interim payment of US$25m, in respect of which both the High Court and Court of Appeal have refused to grant a stay. The plaintiff says that if the defendant’s present application in relation to costs is successful, the plaintiff is again to be denied the fruits of the judgment which would assist in meeting his legal and professional costs. The plaintiff further argues that the effect of both the South African judgment and the judgment of this Court, which upheld the issue estoppel, is that the defendant has
dishonestly retained very substantial partnership assets that belong to the plaintiff and is using them for his own benefit. So the plaintiff says that deferring payment of costs will effectively be a payment to the defendant of part of the partnership funds he has dishonestly retained.
[11] In response to the argument that a stay is necessary to ensure that the defendant’s appeal against the costs judgment will not be rendered nugatory, the plaintiff submits that he will, in due course, be awarded a substantial sum in costs as a result of the South African judgment. The only issue is said to be quantum. At the very least, it is likely to be in the order of 7 million – 8 million rand, which is a sum of between NZ$600,000 and NZ$700,000. So, the plaintiff argues, there is an available setoff in the event that the appeals against the judgment of the High Court in New Zealand are allowed and the costs orders in New Zealand are reversed.
Undertaking of MD Kidd
[12] Mr Kidd is prepared to undertake that he will not further charge, pledge or assign any part of his right against Mr van Heeren under the judgment of Satchwell J in respect of costs which are yet to be quantified. He says that he has not so pledged or assigned any right of costs in South Africa “other than to effect a partial assignment to Mr Brian John Cooper in the sum of GBP 70,000 (£70,000) as a first ranking partial assignment”. Finally, he says that should he be required by this Court or any other New Zealand Court to repay any amount, if Mr van Heeren pays to him costs in the sum of $552,122, he will repay that amount plus any interest ordered by the Court “from any amount paid to me in respect of my right to costs in South Africa, subject only to the first ranking partial assignment to Mr Cooper”.
Legal principles
[13] It is common ground that, under r 20.10 of the High Court Rules, the Court has a broad discretion to grant a stay of execution of any judgment pending the determination of an appeal. That discretion has to be exercised by balancing the
competing rights of the successful party to the fruits of his judgment against the need
to preserve the appellant’s position against the event of a successful appeal.2
[14] I should add here that the nature of the interim order to pay US$25m itself contemplates conditions to be attached to any disbursement of those funds by the Court to the plaintiff in a manner which would preserve the appellant’s position against the event of a successful appeal.
Overview of argument
[15] As to be expected, the oral argument focused on the credibility of Mr Kidd’s undertaking to set-off against his recovery of costs in the South African proceedings, any liability to repay the costs in the event the appeal is successful.
[16] In this regard, Mr van Heeren’s counsel had two principal arguments. The first was that the costs awarded by the South African Court are unlikely to be fixed until well after the Court of Appeal has delivered its judgment on the substantive appeal. This is because a part-hearing of the costs before the taxing master is not due to take place until 21 and 22 April next. Furthermore, it is almost inevitable that when, at some indeterminate date, the taxing master completes his exercise, the resulting sum due will then be subject to a review and that this process will itself take a long time to resolve. The picture presented to the Court is of some years elapsing before costs on the South African litigation will be settled.
[17] The second argument was that although the claim for costs is in the realm of
29 million rand, there was expert opinion to the effect that costs awarded could be less than 8 million rand. So there is no certainty, let alone reliable probability, that the South African costs award will equate to a sum of money which will allow for the costs paid out of New Zealand to be returned with or without interest.
[18] There was no serious contest to the proposition that the taxing of costs would take a long time in South Africa. But, rather, the argument was that one of the
reasons it would take such a long time is that Mr van Heeren had instructed his
2 Duncan v Osborne Building Ltd (1992) 6 PRNZ 85 (CA).
lawyers to challenge every line item of costs. This conduct needed to be considered against the practice in South Africa that the parties will largely agree costs, reserving to the taxing master only those issues that cannot be agreed.
[19] To not put too fine a point on it, the essential argument was that Mr van Heeren is abusing the taxing process in South Africa by requiring every line of item of costs to be examined and adjudicated on by the taxing master so as to postpone the inevitable day upon which he has to pay significant costs to Mr Kidd.
[20] It further needs to be kept in mind that the pre-trial and trial proceedings in South Africa were lengthy and that the judgment of Satchwell J was upheld by the Supreme Court of South Africa, which expressed agreement with her judgment.
The settlement of costs in South Africa
[21] It is necessary to resolve whether or not it is true that Mr van Heeren is taking such an intransigent attitude to settlement of costs in South Africa.
[22] Before the Court is an affidavit from Ms Heleen van Dyke, the costs consultant engaged by Mr van Heeren. She records that the bill of costs currently being pursued by the plaintiff’s attorneys is for the sum ZAR 29,758,058.94. Ms van Dyke exhibits the defendant’s notice of intention to oppose taxation and the list of objections. There follows 31 categories of objection, many categories themselves having a large number of items in them. For example, one of the larger categories (category 5) has well over 60 items, including bracketed items such as 133-136.
[23] In response, Mr Nick du Preez, the legal costs consultant for Mr Kidd, filed an affidavit. First, he addresses the alleged delay of 19 months to produce a bill of costs after judgment, pointing out that this delay dates from the date of the judgment handed down by the High Court on 21 May 2013, with the Supreme Court refusing leave to appeal on 21 October 2013. He then narrates a history of the attorneys, seeing if they could negotiate an appropriate figure and only then did he receive instructions to prepare a bill of costs. He started this task in January 2014. Replying to the proposition that he was not moving the taxation bill forward, he narrated his efforts to procure the chief taxing master to become seized of the matter in the
expectation he would thereafter issue directions or a timetable for the taxation to be commenced and completed.
[24] Mr du Preez narrates that he suggested, in the presence of the taxing master, that it would be useful if he and Ms van Dyke were to meet in advance of the anticipated process of taxation commencing on 21 and 22 April next, and that in the meeting they would endeavour to limit potential areas of dispute. But he says that Ms van Dyke was not prepared to meet. He then goes on:
I should lastly mention we have a situation currently which is almost unprecedented in my many years of experience as a cost consultant. In the overwhelming majority of cases it is commonplace and practice for senior cost consultants to be able to agree among themselves various items on a Bill of Costs so as to limit the issues in dispute. More often than not a substantial portion of any bill is resolved in this manner, leaving only real areas of disagreement for adjudication and ruling by Taxing Master. Indeed, Ms van Dyke eludes to this in paragraph 13 of her affidavit of 23 June 2015 where she says “It is expected of the opposing and presenting attorneys to limit the issues in dispute and present the taxing masters either orally or in writing with a list of issues in dispute.” I agree with her. In fact, the entire structure of the taxation process is geared to that. That is why a detailed bill needs to be presented and why one’s opponent is required to furnish a written notice of opposition specifying the items on the bill of costs objected to, together with a brief summary of the reason for each objection. I think it speaks volumes that in this case, not even one item on a substantial bill of costs has been capable of being agreed. Indeed, Mrs van Dyke has told me, that she has specific instructions not to settle a single item on the bill.
[25] As to quantum, Mrs van Dyke has expressed the view that the plaintiff will not recover more than one quarter of the quantum of the bill on taxation. Mr du Preez expressed the opinion that the taxing master is likely to award costs somewhere between Mrs van Dyke’s estimate of 8 million rand and the full amount drawn, approximately 29.7 million rand.
[26] I would note that Ms van Dyke did not estimate 8m but, rather, said “not more than 8m”. However, having selected 8 from 29, I think the reasonable inference from her evidence is that it is somewhere above seven and less than eight.
[27] I also note that at that level it, in broad terms at least, equates to the order of costs against Mr van Heeren in these proceedings, albeit under appeal.
Submissions as to the appropriateness of the stay
[28] In the submissions in support of the stay, Mr Latimour argued that if Mr van Heeren’s appeal to the Court of Appeal is unsuccessful, the plaintiff will only experience a comparatively short delay in receiving his costs. Mr Latimour opposed my suggestion that the Court can anticipate that if the appeal against the issue estoppel is unsuccessful, that there would be a further application for leave to appeal to the Supreme Court. He submitted that I was constrained to deal with the application before me and could not have regard to what might happen should the appeal be unsuccessful. He also expressed the opinion that the Court of Appeal judgment was likely to be available within three months, that being the target date for delivery of judgments from appeals.
[29] In reply to that submission, Mr Mills QC submitted that his team had already been told that in the event of an unsuccessful appeal, Mr van Heeren will seek leave to appeal to the Supreme Court. He submitted that, as a matter of principle, it cannot be correct that because the application for the order has been shaped against a stay until the outcome of the appeal, there is no jurisdiction to consider the matter more broadly and that it cannot be possible, by way of drafting an application for a stay to limit the Court’s discretion under the Rules. This would frustrate the ends of justice.
[30] Mr Latimour, in reply, submitted that he was not arguing that this Court has no jurisdiction to consider the prospect of further delays after an unsuccessful appeal to the Court of Appeal. Rather, that if there is a stay, it will only last until the decision of the Court of Appeal is handed down. So it is irrelevant to consider, as a prejudicial effect, delay beyond that date. The consequences of granting a stay now only extend to the date of the delivery of the Court of Appeal decision. The consequences cannot, by definition, extend beyond the term of the stay.
[31] One of the implications of that submission is that if Mr van Heeren’s appeal is unsuccessful and if his solicitors then seek leave to appeal to the Supreme Court, there will be a further application for stay and that application will also be limited to the period of time an appellant waits to know whether or not leave is to be granted.
And then, if leave is granted, there would need to be a further application for stay. Each of these applications will impose further costs on Mr Kidd.
Analysis
[32] I am satisfied that there will be an award of costs against Mr van Heeren in the sum of at least 8 million rand which is broadly in the same realm as the order of costs in New Zealand of $552,112.00. Secondly, and as a result, Mr Kidd’s undertaking as to set-off will be effective. Thirdly, I am of the view that the costing process in South Africa is being delayed and deliberately so by Mr van Heeren. I favour the evidence of Mr du Preez over that of Ms van Dyke on this point. I note that this is not due to an issue of any credibility between the two witnesses, but by way of analysis of the material that they have put before the Court and which is summarised in this judgment.
Decision
[33] Following the hearing, I received a further synopsis of submissions from the defendant, dated 15 March 2016. Part of those submissions responded to the proposition of an undertaking of the plaintiff. This drew a response from counsel for the plaintiff on 16 March. I agree with counsel for the plaintiff that the opportunity to file submissions in writing about the terms of the proposed undertaking of Mr Kidd was not intended to be an invitation for a further round of submissions.
Refusal of stay of execution of the costs orders
[34] For these reasons, I do not think that Mr van Heeren has advanced a meritorious argument for a stay. The costs awarded against him have been lodged in his solicitor’s trust account here in Auckland. The burden was on Mr van Heeren to make the case for a stay. He has not made the case. I refuse to order a stay. The costs are payable upon the filing and service of the proposed written undertaking of Mr Kidd, recorded in [12].
[35] Mr Kidd is entitled to costs on a 2B basis on this application. If the parties cannot agree costs, I will receive submissions limited to three pages each, exchanged in advance, to be filed within one calendar month of this decision.
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